Business Finances: What Is an Invoice?

Business Finances: What Is an Invoice?


Invoices are an essential piece of business dealings. Whether you’re someone who sends out many bills or you receive a lot of bills for your business, you need to understand invoices.

If you want to stay on top of your business finances, the information below is going to be very important. We’ll look at the specifics of invoices today, giving you the insight you need to manage money exchanged through invoices.

Let’s get started.

Business Finances: Understanding Invoices

An invoice is a document used to signify a fee that has to be paid for a particular product or service. The terms “invoice” and “bill” can be used interchangeably in a lot of cases.

The key difference is that “bills” tend to come from municipalities or landlords, whereas invoices are used between business parties. Whether you’re receiving or sending, the most important thing to know is how to read different parts of an invoice.

Invoice Structure

At the top of the invoice, you’ll see your address and personal information followed by phone numbers and emails. On the other side of the document, you’ll also see the sender’s personal information.

In the body of the document, you’ll see the items you’re being charged for. The item name sits to the left of the description. This should clearly describe the product or service you’re being billed for.

If you’re writing the invoice, make sure you’re concise yet clear about the description. If you’re not, there can be complications if there’s any confusion about invoices in the future.

Followed by the description of the product or service, you’ll see the quantity. If the invoice is for a service that requires an hourly fee, the quantity section should just list the number of hours spent.

Billing Rates 

The next section is the unit price or the hourly price. This is the value for one of the items or one hour spent on a particular project. Don’t list the total cost of hours or items in this section.

The next section is the total amount of the particular product or service in question. In this spot, you multiply the quantity by the unit or hourly price. If there are more items or services in question, you can list those in the spaces below the first item.

After everything is added to the list, you can tally up the full value and add it to the grand total section. If you’re not certain about how to create an invoice or don’t think that you’d do a good job, you can find templates for invoices online.

In fact, it’s advisable to do this because a clear and concise invoice makes business dealings a lot easier for both parties.

Need More Financial Management Tips?

If you’re looking to keep track of your business finances, there’s a lot more to learn. We’re here to help you out with all of the business information you need. It gets overwhelming, and sometimes you need a little assistance.

Explore our site for more tips and tricks on how to manage money for your business, practice, or personal records.